How is an education loan repaid?

Being a bright student since his school days, Himanshu knew he wanted to pursue a career the field of Biotechnology, post his bachelors of science degree. He crossed the first threshold when he cleared his entrance exam with flying colours and got admission into one of India’s premier institutes.

He always knew that he wanted to pave his own path and did not want his parents to dip into their savings. He believed that those assets belonged to his parents, and they might require them in old age. His next best option was obtaining an education loan. He knew that many financial institutions like Tata Capital helped students support student’s dreams of further education.

When he went to Tata Capital, he was informed that they could help him pursue his dream with the educational loan that would cover the cost of his course. Further, many education loans include the student’s living expenses apart from the course fee. The loan application procedures are simplified with minimal eligibility requirements and fast turnaround disbursal period.

Education loans come with additional features of deferred repayment option and lower interest rates, apart from other personal loan aspects. The general eligibility criteria for the education loan are:

  • Past academic record of the student
  • Reputation and affiliation of the institute and the chosen course
  • Job opportunities available after completing the education
  • Probable salary package a student might receive in order to determine the repayment capacity
  • Credit history of co-applicants (generally parents)

Education loans are primarily to help students concentrate on their studies without worrying about the loan repayment or attached collateral security if any. The loan amount is not disbursed in one go, but in different stages depending on the fund requirements, as per the fee structure and payment schedule of the institute.

Himanshu was also explained that the repayment of the loan and the EMIs would begin only after the course has been completed and he has a job offer. Many financial institutions provide a buffer period, after course completion, to allow students grab a relevant job opportunity with respectable salary package to repay education loans. Once he started earning, Tata Capital would initiate the process for repayment of the education loan, in the form of predetermined EMIs.

With all this information and his primary research, Himanshu, availed an education loan for his Biotech course. He knew that once he completes the course and gets an offer from some reputed organization, he could start the EMIs to repay education loan. Moreover, he would get tax benefits while repaying his loan. Under Section 80E of the Income Tax Act, individuals can claim deduction for an education loan, as one can get a tax benefit on the interest paid on the loan. This is how Himashu, fuelled his career with Tata Capital’s education loan.